first estimate of real GDP for a calendar quarter is called the advance estimate (issued one month after quarter) One month later, it issues a revised estimate, and a month after that it issues its final estimate. Every summer, the Commerce Department issues revised figures for the previous two or three years

The Service Sector vs. GDP

Tough to measure services like banks hospitals

Household Production

GDP does not count the value of your efforts to clean your own house, to wash your own car, or to grow your own vegetables

Underground and Illegal Production

Some production goes unreported in order to evade taxes or the law. It is not likely to be counted in GDP

Aggregate demand

relationship between the total quantity of goods and services demanded (from all the four sources of demand) and the price level, all other determinants of spending unchanged

The aggregate demand curve

represents the total of consumption, investment, government purchases, and net exports at each price level in any period. It slopes downward because of the wealth effect on consumption, the interest rate effect on investment, and the international trade effect on net exports

which equal the sum of planned levels of consumption, investment, government purchases, and net exports at a given price level, to the level of real GDP

Equilibrium

Aggregate expenditures=GDP

Multiplied Effect

The Multiplied Effect of an Increase in Autonomous Aggregate Expenditures, based on MPC. small MPC means flatter and samller multiplier effects, steepr means larger MCP and more spending through rounds. multipier =Δequilibrium/Δa

Who measures CPI and in what two ways

Department of Labor

Household survey, very small sample size

Establishment survey, larger sample (takes longer to get to final)

E if htey worke dat all or temporary absence

U no work for the week, available for work, made attempts, expected to be recalled

Who measures GDP

Commerce department

CPI

Uses market basket from 1982-84 (base year) then compares with a current market basket